Forecasting the volatility of EUA futures with economic policy uncertainty using the GARCH-MIDAS model

Financial Innovation

Table 7 Portfolio performance over the 400-day out-of-sample period

Model	\(\gamma\) = 3		\(\gamma\)= 6		\(\gamma = 9\)
Model	R	CER	R	CER	R	CER
GM-\(^{\Delta }GEPU\)	0.132*	0.095	0.065	0.045	0.043	0.029
GM-\(^{\Delta }EEPU\)	0.147*	0.111	0.082 **	0.062	0.057**	0.043
GARCH	0.098	0.076	0.048	0.037	0.032	0.025
GJRGARCH	0.064	0.050	0.031	0.024	0.021	0.016
NAGARCH	0.046	0.036	0.023	0.018	0.015	0.011
NGARCH	0.105*	0.081	0.052	0.040	0.034	0.026
EGARCH	0.093	0.071	0.046	0.035	0.030	0.023
IGARCH	0.098	0.076	0.049	0.037	0.032	0.024

R is the mean excess returns and CER denotes the certainty equivalent returns. \(^{**}, ^{*}\) indicate significance at the 5% and 10% levels, respectively, under the t-statistics test. All values were based on days multiplied by 100. Bold numbers represent the largest values for each column